The Market Ticker
Commentary on The Capital Markets- Category [Editorial]
2017-03-26 10:45 by Karl Denninger
in Editorial , 2698 references
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Friday afternoon the Republicans "pulled" the AHCA without a vote.

This is the common way that the party in power makes sure you never get a recorded answer these days as to who opposes and who supports some piece of legislation: If there is no majority to pass it, they never vote at all.

If you think about it for a bit you'll realize that's the exact antithesis of representative government.  Representative government not only "works" when it passes something it works when it fails to pass something too, and the list of elected officials who did and did not support something that fails to pass is just as important and maybe more-so than those who supported (or not) passed legislation.

But, now you simply have claims -- not votes.  And remember folks, claims are not votes; if they had been (according to the polls) we'd have President Hillary right now.

Now let's talk about health care and "health insurance." 

Let us remember that insurance is simply a math problem.  That is, insurance is always and everywhere simply the expression of the formula [sum(p * c) + cost(operation of insurance company]

p = probability of having to pay a claim on a specific event
c = cost of the event

And of course "sum" is the sum of all the "p * c" components that exist for all the things you bought the insurance against.

Given this fact I will now demolish a number of lies that you've been told.

Health insurance should cover routine and expected events.  Nonsense.  If p = 1.0 then it is always cheaper to simply pay cash because [cost(operation of the insurance company)] is never zero.  For something where p = 1.0 for all, or nearly all of the population you should never buy insurance for same since p * c = c!  Again, just in case you missed it: Putting such an expense through an insurance company will never cost less money; it is always cheaper to pay cash.  The only reason to force such expected and certain events through any third party is to hide the cost from you and remove competitive pressure so that someone can jack up the price or collude with others to do so on a grand scale (which is illegal under 100+ year old law in 15 USC, by the way) and steal your money.  Period.

Obamacare is so expensive because men -- and women who have gone through menopause -- have to buy insurance that includes maternity care.  There are dozens of variations of this claim run by politicians and "policy wonks" on the TeeVee; they simply change the condition and population to suit their audience.  It's maternity when they're talking to men and senior women, it's prostate cancer when in a room full of 20 year old women, it's IVF or abortion when talking to a bunch of evangelicals. This is a lie because "p" for such an event for such a person being spoken to at the time is (obviously) zero.

Zero times anything is zero.

So what is the purpose of requiring such "mandatory benefits"?  Simple: It reduces "p" over the entire population of people with policies.  But since the total of those "p * c" computations is the sum of all of them for each individual the purpose of such mandates is to force you to pay for someone else's treatment for a condition you cannot possibly suffer.

To put it more simply: It's theft from those who can't have that condition occur and it's intentional obfuscation of the cost of said insurance for those who can.  In short it's a lie told to the entire population; the exact substance of the lie depends on whether you're in the "can happen" or "can't happen" group but in each and every case whenever someone is forced to buy a policy that covers an event that cannot occur both the can and cannot groups are being lied to and one of them is being robbed.

This lie is intended to and acts to shut down any discussion of the real problem: Why is "c" so damned high?

Obamacare is so expensive because the "high risk" people are in the same pool as everyone else; the AHCA would "fix this" by putting back in place High Risk Pools and insurance costs would drop substantially for health people.  True, as far as it goes.  But there's a problem: The ACA, or Obamacare if you prefer, was written and passed because those High Risk Pools were collapsing!  They were collapsing because by definition everyone in them had "p = 1.0" for something; they had cancer, diabetes, HIV or some other serious and usually-chronic condition that had already happened.

When you get down to it for someone with a p=1.0 problem the cheapest way for them to be treated for that condition is to pay cash for it.  The more hands the money goes through the more you spend in total.  This is obvious to anyone who thinks about it for more than 20 or 30 seconds because nobody works for free.  If you put the money through an insurance company with thousands of employees and big buildings all over the place then the total cost of such care goes up because the insurance company has to pay all of its employees and make a profit (no matter how tiny) or it is no longer in business!  It would be far cheaper to simply stroke a check from Treasury instead of going through all sorts of convoluted arm-waving and cost-shifting such as Obamacare "subsidies" and insurance company mandates.

Here's the problem with simply stroking the check: As soon as you get rid of all the layers of obfuscation the cost is immediately exposed to everyone.  I've already mentioned the lie told to both the people with the (possible) condition and not above when it comes to cost, so I'll focus here on a second lie: Let me remind you that right now the Treasury of the United States (that's everyone in the country, since we're all allegedly responsible for the debt and deficits accrued) spends $350-400 billion a year between Medicare and Medicaid on health services for people with just one condition: Diabetes.  We can reduce that to nearly zero (that is, cut Medicare + Medicaid expense by roughly 25% instantly) by refusing to pay anything from public funds for those people who refuse to undertake a lifestyle change in the form of what they eat that has a proved track record of reducing the need for drugs to treat the far more-common form of that condition (Type II) to near-zero and at the same time dramatically reduces all of the complications (blindness, amputations, kidney disease and dialysis, etc) as well for both forms of the disease.  In fact for most Type II diabetics making this change eliminates the condition entirely.  Note that I did not say "cure" because if you go back to what you were doing you'll almost-certainly see the condition (poor blood sugar control) immediately come back -- but eliminating the condition eliminates all of the cost to the health system.

Remember, as I pointed out up above, that a big part of why Obamacare was written and passed was that the "High Risk Pools" were expanding in cost at an explosive rate.  The states did not have the money to continue funding them and many people with some of these conditions were dying before they could get into the pools and thus access treatment due to delays in enrollment driven by lack of funds.  So the lie here was twofold: Political debate on the cost of such treatments was refused as it was for everyone else up above and at the same time the fact that many of these conditions are not only due to voluntary action (e.g. IV drug abuse, unprotected anal sex or eating things once overweight that are known to exacerbate these conditions) in some cases, specifically those related to diabetes, the condition and its medical costs will disappear if the person in question changes what they eat -- in other words, they make a lifestyle change.  In other words not only are we all having our money taken to pay for the voluntary decisions of others who "made a big mistake" (which is perhaps defensible on the grounds of compassion) we are also having our money stolen to pay for the ongoing voluntarily decisions of others who refuse to change and, if they did change, would see the condition and thus its cost disappear entirely.  That is not compassion, it's pig-headed theft.

In short in order to prevent discussion of both the cost of said treatments and the role that voluntary actions of the sufferers, both causative and continuing have on the expenditure of funds politicians drove the spending through "health insurance" firms and thus made it even more expensive simply due to the middle man being present.

If there was little or nothing we could do about cost then we might all be able to stop here and, at least, take the insurance company costs out of the picture for those with p = 1.0 for some medical problem.  But that's simply not true, which is why the larger lie, and the one that I listed first, is run on everyone instead of simply focusing on those with already-existing medical problems.

Why would you need health insurance if this pricing was commonplace for the following routine medical things -- and remember to extend these representative samples to everything else in the medical field:

  • MRI: $275
  • CT scan: $167
  • X-Ray: $37
  • Mammogram: $142
  • Ultrasound (pregnancy-related primarily, I suspect): $94
  • A1c test (common for diabetics): $4
  • CBC (complete blood count; common for a lot of diagnostics): $3.13
  • Metabolic panel (common diagnostic as well): $3.50
  • PSA screening (common for men over 50): $7
  • 3-Panel cholesterol (the cheap and common one): $3.94
  • Tetanus booster: $20
  • 90 Prozacs: $1.98
  • 30 Prilosecs: $1.44
  • 30 Plavix (blood thinner; newer generation of Warfarin): $2.76
  • 90 Zocors (which I'd argue you probably ought not take at all!): $2.16

These are not fantasy prices -- they're real.  They're what you could have today, or darn close to them if we had a conversation about competitive markets in medicine.  I didn't pull these numbers out of my ass; they're on a "concierge" site for a "direct care" practice in Michigan and none of them are being provided at a loss.

Think about what you spend on "health insurance" today; whether you pay for it directly or you "get it" through employment.  If you get it through your job then every penny of what your employer spends is money you could instead have in salary.  Multiply the monthly amount your employer spends on health insurance for you by 12 and that's money you should receive in cash but don't because it's stolen and given to an industry that then charges you five to ten times the above through the so-called "insurance."  In fact for most medications your co-pay is larger, often by ten times, the above prices!

Would you rather pay a $10 or $20 co-pay for that Plavix prescription or would you rather pay $2.76 cash?

If the answer is "cash" then can you please explain why you would then pay for said "coverage" at all?

So why are these medical procedures, drugs and similar so expensive now for most people?  Why are you basically extorted into buying "insurance" either through your employer or directly?  Why is now the law to run these charges through a company that has to make a profit and thus is guaranteed to drive up cost?

Simple: It prevents us from all having the two political discussions up above -- why are we being ripped off to the tune of 1,000%, that is 10x what we we ought to be paying for virtually everything health-care related and why should we pay anything for someone else's decision to continue a lifestyle choice that results in the expenditure of hundreds of thousands of dollars after they get the condition when they can change that lifestyle choice and eliminate not only the condition but nearly all of its expense?

We know that the pricing above, or similar to it, can exist for everyone in the United States right now.  We know this because it does exist in the United States, right now.

We also know that health insurance companies and providers of health-related products and services are not immune from Anti-Trust law (15 USC Chapter 1.)  We know this because that case went to the US Supreme Court in 1979 and the insurers and those conspiring with them lost.  Specifically, it was ruled that "volume pricing" arrangements and similar were not "the business of insurance" and thus not entitled to protection from anti-trust enforcement under McCarran-Ferguson. We therefore know factually that the failure to bring said cases at the State and Federal levels from 1979 to today has been a political decision, not a matter of "not having" laws that could be applied.  In other words both State and Federal law enforcement and the executive branches of government in both places have intentionally refused to enforce the law and by doing so have become willing partners in you being robbed out of $9 of $10, approximately, spent on health care.

We know that if the cost of health care came down by 90% almost everyone could and would simply pay cash for all routine expenses.  Having a baby.  Vaccinations. Annual checkups. An MRI for a sports injury. A CT scan for something serious that's suspected in your chest or head.

We know that if the cost of health care came down by 90% true insurance for serious catastrophes like cancer, a serious injury or a heart attack would cost pennies compared to what it costs today.  If the cost of cancer treatment was $10,000 instead of $100,000+, and it would be if we locked up the monopolists that refused to stop playing their game of obfuscation and cost-shifting the cost of such insurance would be a fraction of what you spend today to insure your $10,000 automobile!  After all, it's more-likely in a given year that you'll wreck your car than get cancer!

We also know that there would be circumstances under which costs would remain very high; "orphan" conditions are the prime example, simply because the number of sufferers is low and thus spreading the development cost of treatments becomes problematic.  A condition that has 10,000 sufferers in the United States at any given time, for example, has a risk (probability) of 0.003% across the population.  If the cost of treating that condition is $500,000 (because it costs billions to develop the drug and there are only 10,000 customers for it) then for $15 (plus a profit for the insurance company) you could buy insurance against that condition for life.  Would you buy such "rare disease" insurance if, say, the "blended" cost was about $50/year to cover all such conditions?  Some people would not, but if we had the political discussion on this point and decided that the choices were "buy the insurance personally, pay cash if it happens to you without it or suffer the consequences including your death for which there will be zero funds spent other than through private, consensual charity" would that not be a better system than we have today?  It sure as hell would be a cheaper one and nearly everyone would fork up the $50!  Hell, make that $50 something that is akin to the "Presidential Election Fund" checkbox on your 1040 except that it's an opt-out rather than an opt-in if you'd like; $50 for single or HOH, $100 for married and an additional $50 for each dependent.  I'm ok with the mildly-coercive nature of that, considering the potential consequence of choosing "no."

We can surmise that the reason for the above political refusal to have this discussion is due to both lobbying and the fact that should the law be enforced Health Care would drop from its present ~19% of GDP to 3% (it's historical figure prior to the monopolists pulling this crap starting in the 1970s and 80s) almost immediately.  That would be a rough reduction of 15% in GDP which, I remind you, exceeds the 10% drop that economists call "a Depression."  It would not last long because all of the money currently spent through this scam that no longer was would be freed up to produce other goods and services in the economy and the impact on reduction of cost for businesses would be immediate and immense.  Further, the salary increases that would result from the embedded "health insurance" expense in an employee being removed (allowing it to be paid directly to you) would lead to a huge increase in consumer consumption in other areas.  But make no mistake -- there would be losers: Lobbyists, overpriced or overstaffed administrators in health care and similar, and during the adjustment period GDP would indeed fall before rebounding.  Find the politician that is willing to accept this without being forced -- good luck.

Finally, let me remind you that these are not particularly-new ideas.  I've been talking about them since the 1990s when I was the CEO of MCSNet.  I've been writing on them since The Market Ticker began publication.  There are two simple legislative agenda items here and here (note the dates of publication), never mind the entire section in Leverage, that would immediately address virtually all of the above.

I have had a standing offer out to several current House Leadership members since 2011 and to several Senate staffers since not long after to come to DC at my expense to testify before an open committee hearing on the math in this regard and resolution of these issues.

There have been no takers in the last six years.

Among political commentators on "the right" the following have also refused to take this on:

  • Hannity
  • Rush
  • Mark Levin
  • Glenn Beck
  • Michael Savage
  • Bill OReilly
  • Hewitt
  • Michelle Malkin
  • Laura Ingraham
  • Neal Boortz
  • Ann Coulter
  • Tucker Carlson
  • Judge Napolitano (despite the obvious nexus to law in 15 USC)
  • Judge Jeanine (despite the obvious nexus to law in 15 USC)

Oh, and this is not a complete list; it's just a list of people who, off the top of my head, have said zero despite, in many cases, my direct prodding.  I will note that among the left there have no takers either; I simply don't have anywhere near as complete a list of them (there are far more left-leaning political commentators than right-leaning!)

So folks, when you get down to it, it's up to you.

You can look at the AHCA being pulled as "just another thing" and decide to ignore it.

You can try to ignore this too if you want, but it's truly stupid to do so:

That's from the US Treasury's own published MTS taken from September of each year (close of the US Government fiscal year) back to 1998.  It is instructive to note that the blue line is an exponential series, and is expanding at about 8-9% a year, far beyond any rational projection for economic growth.  It is also instructive to note that it is a mathematical fact that any two exponential expansion curves, where one is growing faster than the other, will eventually cause the destruction of the slower-growing one if the faster relies on the slower to pay for it.  That's arithmetic and was the reason that I projected in the 1990s that this trend would bankrupt the United States.

Finally, it is worth noting that Obamacare, for all of its disruption and 2,000+ pages of obfuscation and horsecrap, managed to produce exactly one year of lower Medicare and Medicaid expenditures after which the former trend resumed almost-entirely unchanged.  For those who claim it's all about people getting "older" that is the final lie I would like to demolish; the trend from FY 1998 to 2016 excluding the one-year decrease was 8.35% (all-in) and 8.64% (Medicaid), respectively.  That is, Medicaid (poor people) spending expanded at a slightly-faster rate than Medicare (old people).

We either act on all of this as a nation now or it destroys the economy, it destroys the markets and it destroys both state and federal budgets.

My offer to both government and political commentators whether in the list above or not and irrespective of their political bent remains open: I will be happy to appear by voice, by video or in person to debate and discuss the facts in this regard.

If there's anyone willing to take it on, that is.

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2017-03-20 09:09 by Karl Denninger
in Editorial , 979 references
[Comments enabled]  

Let's face it -- Ryan and Trump are not going to do anything to actually address the health care mess.

Health care is not about "coverage" or "insurance."  It's about price.

Therefore any discussion about "coverage", "insurance" or similar is an intentional deception until and unless price has been addressed.

The facts are that the federal government spent $1,417 billion dollars last fiscal year between Medicare and Medicaid.  In 1998 the federal government spent $379.95 billion dollars on the same programs.  That approaches a quadrupling of said spending over that time period, and an increase from 23% to 37% of the total. If you believe the bleating from hospitals and doctors about how Medicare and Medicaid "don't cover their costs" then private spending must have gone up at an even-faster rate than spending by the government.

The facts are that we spend twice as much as a percentage of GDP (and per-person, roughly) as virtually the entire industrialized world -- and nearly all of those nations have socialized systems.

Let me remind you that socialism always loses to capitalism, and the reason it loses is simple: There is no profit motive in a socialist system and therefore there is never an incentive to pound your competitor down the street over the head with a Clue-by-4 in the form of price.

Technology is responsible, in the main, for what is called productivity growth.  That's a very simple thing when you get all the wonky economist talk out of it: Productivity growth means doing more while expending less, whether the "less" is money, labor, time or material cost.

If you want to boil it down to what used to be MCSNet's slogan, it's this:

Better, faster, cheaper.

The usual chestnut adds "pick any two", but ours finished with "you don't have to choose."

Only true competition produces you don't have to choose.  Without it technology is a horrifying thing because it can be -- and will be -- used to obscure facts and screw you.

We live in a nation of alleged laws.  Our government has a duty to enforce those laws, and in the context of Health Care that means prosecuting all those entities that collude or screw consumers.  The very existence of an "Explanation of Benefits" statement that shows a "price" of $10,000, a "negotiated discount" of 80% and then some tiny amount you're expected to pay is proof of collusive action that is intended to and does screw you and, I'd argue, Racketeering.

Why?  Because you were never given a price or any way to negotiate it before you had the procedure.  Your "discount" is based on what insurance you have and is concealed from you until after you have already incurred the expense, which is an effective agent of extortion ("either buy this good insurance or get hosed with a smaller discount or no discount at all!")  It is further an attempt to force a tied sale for something that, absent the collusion, you might not have wanted to buy at all (in this case health "insurance.")  And finally without pricing being in the open and level you're either being discriminated against or for and that discrimination is based on what you did or didn't buy from a third party.

Then there are those who openly keep some of whatever "discount" they "negotiated", such as "pharmacy benefit managers."  The classic example is that you have a $20 co-pay for a prescription but you can buy the drug without any insurance at all for $10!  Not only is the pharmacist not required to post a cash price (so you know this before you pull out the insurance card) in many cases he's forbidden by contract to tell you.  Every time you fill such a prescription you get screwed out of $10 simply because you told them you had insurance!

How could you choose which station to pull into for gasoline if none of them ever posted a price and the pump didn't tell you how much it was until after the gas was in your tank?  Worse, what if you had to tell the gas station pump which car insurance you had before it would give you a price after you filled your tank?  How badly would you get screwed on the highway if that was the case?  What if there were no prices on the grocery store shelf -- just a barcode that looked it up but the register never displayed anything except a final total when you pressed "all done"?

What if after you pressed "all done" and were presented a price, having told the grocery store which homeowners insurance company you had they kicked back 5% of your bill to a firm employed by the insurance company -- all because they claimed they gave you a "special deal"?  The "special", of course, was that you paid double for your groceries over claiming you had no insurance at all.

You know the answer to this question -- you'd get reamed every single day.

Here's the other thing you also know: If a grocery store or gas station owner tried that sort of stunt nobody would shop there; they would go down the street.  If they got together so everyone did the same thing they'd all be in jail in an afternoon.

Please explain to me why the doctors aren't all in jail?  Why isn't the hospital administrator in jail?  Why isn't the pharmacist and the owner of the pharmacy in jail?  Why isn't the insurance executive in jail?  Why do not those who work in any of these fields and gain their income by screwing you blind find themselves with nobody who will even sit in the same pew with them in church, say much less find themselves in the graybar motel for the rest of their lives -- with all their material wealth confiscated to provide some restitution to the millions of people they screw blind every single year?

Folks, either this stops -- right now -- or we lose the country.  It's that simple.

On a personal level if you have recently been given some very bad news -- that you are now considered to have a chronic condition that's weight or metabolic disorder-related, or you're overweight (or just plain old fat) and thus clearly at risk for this to happen even if it hasn't yet there are things you can do beyond getting pissed off at the scam (which clearly you won't do, or this would have been addressed by now.) 

You can start by reading here.

And then, you might click here, which will give you (in reverse chronological order) the publicly-available articles I've penned on personal health and are marked as exempt from expiring.

And finally, if you are willing to get off your ass and start demanding that people face the music for what are quite-clear violations of 100+ year old law, you might try reading these articles -- which are (mostly) focused on policy, as opposed to personal health.

But we already know the truth on that last point, don't we?

Nobody, statistically-speaking, is going to do anything beyond possibly reading a bit, and for that reason you better do the first two -- right here, right now, today.

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2017-03-15 21:57 by Karl Denninger
in Editorial , 2844 references
[Comments enabled]  

Look, this is math.

I don't want credit.  I don't care if you never admit you talked with me.

Seriously -- I don't care.  This isn't about glory.

It's about the Republic and its survival.

The arithmetic is clear.  It's irrefutable.  There's no discussion to be had.  It's fact.

I called this in the 1990s when I ran MCSNet.  I called it again in 2011 in Leverage.  I've been raising Hell about it since 2007 on this blog.  It wasn't hard and I claim no special knowledge or insight.  All that was required was reading the MTS and either a $3 calculator or a piece of paper and a pencil.  An act, I remind you, that every CEO does every single month -- that is, reading the financial statements.

Look, I get it.  The political side of dealing with this is hard.  You're going to******off a lot of very powerful and wealthy people.  They're going to get very angry.

The bottom line is this: You have the ability to put a stop to all the medical scams now -- right now -- using existing law.

If you don't then the nation fiscally dies.  Ryan's bill or no bill; doesn't matter.

If you do it then "insurance" is something that 95% of Americans need only for catastrophic events because the cost of medical care will fall by at least 80% and for most items by 90% or more.  Said insurance will be cheap - under $100/month for a family, and about $25-50/month for a single person.

Nobody will need "insurance" for routine events because they will be able to pay cash.

Birth control will cost under $10/month.

Routine labor and delivery will cost under $1,000.

This isn't hyperbole -- it's fact.

We know this is true.

We know because The Surgery Center of Oklahoma performs cardiac bypass surgeries all day long for $10,700, complete, no surprises, no extras including complications that may arise -- done.  $10,700, period.

The hospital across town charges five to ten times as much.

But even the prices at The Surgery Center, nice as they are by comparison, are chock-full of monopolist price fixing. Why? Supplies, devices and equipment are all provided under monopolist, price-fixed schemes for starters.  We know this because the same bypass surgery is about $2,000 in India where there is no such collusion, the doctor was trained in the United States and the supplies and devices are the same as in the US but unlike in the US the suppliers have to compete for business.  The difference is that in India competition reins because there is no hiding the cost, there is no extortion via "explanation of benefit" statements from providers and thus price reflects competitive pressure not only on cost but quality of service between providers.  Not surprisingly the complication rates in India for that surgery are lower than they are here in the United States.

You can find bills for routine childbirth from the 1960s -- including epidural, doctor and nursing charges, charges for care of the baby, three nights in the hospital, soup-to-nuts.  Inflate them by the CPI to today's price.  You wind up right around $1,000.  Routine, vaginal childbirth certainly hasn't changed in the last 40 years in terms of what's required.  The only "change" is that the medical establishment has decided to ramp the price by a factor of ten and screw you out of the money.  It has been able to do so only because there is no competitive option available to you.

In Tokyo, Japan, you can have an MRI done for $200 or less on a walk-in basis -- cash.  How much does an MRI cost here in the US?  You can literally fly to Narita from any major city in the US, take the NEX to Tokyo, have the MRI done and read then get on the NEX again and fly back for less than it costs to have the scan done in the United States.  There is a person on my forum who was just quoted over $5,000 to have said scan done here in the US yet he can fly to Narita round trip and have the scan done for $1,200 -- $1,000 of which is his airfare!

He can fly to Japan four times and have four MRI s done for the cost of one here in the US including four intercontinental airplane rides!  If the price of the scan being 20 times higher here in the US doesn't meet the definition of a scam would you please explain what would?

The entire medical system in this nation is a massive fraud and scam.  It's not a mistake, it's not an error, it's not an aberration it's a scam, it's robbery and everyone involved ought to be in prison.

You're out of time Mr. President.

You either do the right thing with regard to medical care, now, or this nation dies.

We either do the right thing or we let Paul Ryan and his buddies in the Congress, along with the doctors, hospitals and lobbyists and others screw millions of Americans -- a crime for which all of them should be indicted, tried, convicted and hanged.

You choose.

The math is clear.

The facts are clear.

The acts by which these individuals and corporations screw America are illegal. These laws, which include both ruinous civil and felony criminal penalties barring said conduct were passed over 100 years ago and are embodied in 15 United States Code.  They were challenged in the 1970s, the case went to the Supreme Court and the insurance companies and their buddies lost.

It's not a close call.

It's not a matter of opinion.

It's settled law.

You, as President, are able to direct the AG to enforce said 100+ year old law.  In fact, as head of the Executive branch of government, which is responsible for enforcement of the law, it is your job to do so.

Or not.

As Barack Obama didn't.

As Bush didn't.

As Clinton didn't.

As Bush before him didn't.

Four Presidents willfully, intentionally and knowingly refused to enforce 100+ year old law that would have immediately and permanently put a stop to the medical scams and the escalation of cost.

I get it.  This expansion from 3% to 19% of GDP over the last 30ish years has put a half-percent a year on GDP expansion that would not otherwise have taken place.  It has made "growth" look better.  It has wildly expanded the "market cap" of various public companies and their stock prices, including pharmaceutical firms and other health-related conglomerates, along with insurance companies.  It is politically enticing to continue doing it, except for one small problem: 10% expansion annually at 3% of GDP is 0.3% of GDP, a relatively small number both percentage wise and in terms of dollars.  At 19% it's 1.9% of GDP -- a much larger percentage and dollar amount, more than six times as much.

Oh, and this exponential growth, which your predecessors and now you have allowed, is also responsible for more than half of the Federal Debt, all-in, as that same expansion has added to Medicare and Medicaid spending.

I understand that collapsing health care from the current 19% to 3-4% of GDP will produce a huge recession.  It will produce a monstrous movement downward in the stock market.  That freed-up spending will go somewhere else in the economy and the recession produced will be quickly recovered from -- probably like 1920/21, in fact when the entire drop and recovery took less than two years.  The cost of operating a business will drop like a stone; not only will employee costs drop so will any firm's and individual's liability insurance where injury is a risk insured against.  From car insurance to business liability to trucking firms these costs will drop tremendously -- and be reflected in the competitiveness of American business.

This is not a matter of choice any more Mr. President -- other than on time.  We can either do it now, take the adjustment and become the most-competitive place to do business in the Western World or we can keep playing this game right up until our economy and budget collapses -- and collapse it will if you do not put a stop to this crap now.

Last fiscal year the Federal Government spent $1.417 trillion on Medicare and Medicaid, 9.3% more than the $1.297 trillion it spent the previous year. Last year was not an aberration; it was in fact very close to the historical expansion rate from the 1990s forward.  Spending has almost quadrupled on these programs since FY 1998.  Total outlays in 1998 were $1.651 trillion of which Medicare and Medicaid comprised 23%. Last fiscal year 37% of all fiscal expenditures were made on these two programs.  The ACA (Obamacare), for all of its warts, only managed to dampen that rate of expansion in spending for two years, after which it returned to trend.  At this rate of spending expansion within the next four years the government will attempt to spend $2.02 trillion on these two programs combined which will blow an approximately $600 billion additional hole, per year, in the deficit.  That will not be able to be financed since if it you ignore this issue it will be clear that within 10 years the government would try to spend $3.4 trillion per year on the same two programs -- an utter impossibility under any rational expectation for economic expansion.  The impact on private health spending has been even larger on a percentage-of-increase basis due to the blatant cost-shifting that is well-documented in myriad reports and is responsible for a large portion of the stunting of economic progress in America that has occurred over the previous two decades.

We can't keep doing what we've been doing Mr. President.  We cannot continue to allow the monopolists in the medical and health-insurance industries to continue to expand their influence -- and consumption of GDP.  Not for long.  Not for the rest of your first term, and certainly not into the second.  That's the math, like it or not.

Further, that math was either known to you or you would have known if you looked before you ran for President, which means you took the job without any ability to claim "surprise."  Thus, it is not only reasonable to expect you to resolve this problem now, in the present time (particularly given that you have tools as the head of the Executive to do so) it is also quite reasonable for the people to hold you personally to account as President if you don't.

We either admit to what we've been doing and stop the scam or it will overtake the economy and our ability to pay -- both in the government and otherwise, within the next 4-5 years.

We either stop it now or it destroys the economy, asset prices and the nation.

This isn't politics.  It's math.

The facts are what they are.  Demonstrating them is easy and irrefutable.

I'm a (long) day's drive from DC and about the same from Mar-a-Largo.

You name the place and time.

I'll be there -- with the laptop, charts and figures.

I have only one "ask" -- you listen and then act predicated on that which is obvious given the numbers -- politics be damned.

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2017-03-15 20:56 by Karl Denninger
in Editorial , 234 references
[Comments enabled]  

You figure out the rest.

Do or do not.

There is no try, and there is no excuse either.  I tire of hearing the latter.

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2017-03-13 05:00 by Karl Denninger
in Editorial , 947 references
[Comments enabled]  

Adulting is, simply put, the process of being an adult.

It appears to be deceptively simple: Get a job, pay rent or a mortgage, meet your utility bills so the power and water stay on, and have enough left for transportation and groceries.

Too bad it's not that simple.

See, adulting also includes anticipating likely or worse, mathematically or physically certain -- or highly likely -- events.

For example your car will wear out.  Your house will require a new roof.  Your refrigerator, dishwasher, clothes washer and dryer and coffee maker will fail.  They're mechanical things and most require some sort of maintenance -- but even if not it is a certainty that at some point all will require replacement.  You had better budget for these events in advance lest you not have the money when they turn turtle on you.

If you allow yourself to become overweight you are much more likely to require medical attention.  If you allow yourself to become obese then your odds go way up for a whole host of really nasty problems: Heart attack, stroke, diabetes, the destruction of your hip and knee joints and more.  In fact it is virtually certain you will have weight-related medical problems serious enough to impair your enjoyment of life and cost you tens if not hundreds of thousands of dollars.

Now add to this the facts in this post I authored, particularly relating to the economic scamjob aimed directly at you in the form of the medical system.

Six years ago, approximately, I decided that the people of this nation would not, as a group, "adult."

I therefore decided that the only way to reduce the risk to myself of finding myself severely disabled, broke, dead or probably all three within a relatively short period of time (a decade or two) was to get rid of the spare tire I was carrying around on a permanent basis.

That required not a diet but a lifestyle change.

So I did it.

Let's talk about what you put in the pie-hole for a minute.  What part of being an adult with an allegedly functional brain allows you to believe that if you eat what farmers feed pigs, cows and other animals to make them fat on purpose you will become and remain thin and healthy?  Isn't it far more likely that if you eat grains you will get fat exactly as does said cow or sow right before they're slaughtered?

By changing what I ate because I decided to adult in that regard (and thus dropping 60lbs) I made it far less likely that I will run into said medical scamjob.  I also, at the same time, came to terms with acceptance of my mortality if I did face that anyway -- in other words, no, they're not going to get all of my resources; I'm going to dispose of them as I wish instead to those who I wish and if that means I die earlier than I otherwise would then so be it.

But what's adult about allowing the fantasy-land crap to be sold to you without consequence not only by food producers but so-called "experts" in the form of "dieticians" and "doctors" who we now know were and are peddling factual falsehoods?  Low fat? That means high-carb, because it has to; you have to replace the fats with something.  The original "7 nations" study was riven through with fraud, and that's been known for a couple of decades.  There are multiple populations in the northern latitudes (e.g. Arctic) which had historical zero obesity rates and introduced modern "foods" -- all of them blow up like balloons.  What were they eating before?  Animal flesh, almost-exclusively -- for obvious reasons (plants don't do so good up there for a huge part of the year!)  If saturated fat is so bad then explain the zero obesity rates among a population that almost-exclusively eats venison and fish -- right up until they add pasta to the mix, at which point they turn into fatties.

Now continue by explaining how adult it is for you to silently allow this garbage to be peddled not only to you but also to your children, with utterly-predictable outcomes?  Let me remind you: Over half of all adults are either overweight or obese.

While we're on this subject let's talk about how adult it is for you, or anyone else, to scream about "fat-shaming."  You're really going to tell me that someone pointing out that you're killing yourself is "abusive"?  Since when does that constitute anything other than telling you the truth?  Do you like being lied to? Do you like being coddled all the way into a box 6' under ground?  That's exactly what arguing against "fat-shaming" is!  You ought to thank those who make you feel uncomfortable in this fashion because they just might, if their criticism jolts you into adulting, save your life!

Now let's talk about some of the other things you deal with daily.  Why are you on either Verizon or AT&T?  Unless you have some sort of negotiated business account, that is, in which case it might make sense.  If you need Verizon's coverage buy it via Straight Talk!  The exception: If you need tethering, which these days is a lot less likely with free WiFi damn near everywhere.  Are Sprint and T-Mobile worth considering?  Maybe, but not on their "unlimited" plans, which are insanely expensive unless you have three or four heavily-used lines.  Might they make sense if you have two teens?  Maybe, if you force the teens to pay their part of the bill -- which means they need a job!  Otherwise, no: $90 gets you a 5Gb data allowance on two lines from Straight Talk and you pick the carrier -- T-Mobile, AT&T or Verizon (depending on what your phone is compatible with) and if you're single there's no penalty since it's $45/line, period.

Are those "cheap on-contract phones" worth it?  No.  They're not cheap; multiply the additional cost per month times the contract term and tell me how "cheap" that iPhone is.  Here's the answer: About $1,000 or more than if you just paid cash for it!  Are you nuts?

On social media?  Why? So you can preen for the camera and brag about your smug, smiling face and how "beautiful" you are? I hope you realize that the cost of doing so is that thousands of entities get to build a detailed, down-to-the-minute database on you both through your actions and those of your so-called "friends" which they inextricably and immediately link to you personally.  This allows them to hose you and that's exactly what they do with all that information -- use it to extract money from you without you being directly aware of it.  What part of being an adult meshes with playing egomaniac on Facesucker?  That's the sort of thing an emotional child does -- "look at me, how pretty I am."  Please explain to me how posting a picture of the fabulous view you have while eating a nice meal enhances your personal experience.  It doesn't -- the mere act of drawing your phone to take the picture detracts from your immersion in the moment itself. You're not posting that picture because it pleases you you're doing at the cost of your pleasure because you are trying to impress others.

A personal anecdote on this point: Recently I drove some 14 hours to attend a live music performance.  There were a lot of people with their phones out for most of it.  I did snap a couple of pictures, one of them before the performance began - but the rest of the time my phone was in my pocket and on complete silence (including no vibrate.)  Why?  Because just the act of drawing it to take a single picture that one time broke the zen-like state I was enjoying immensely by taking in the music -- not just sound, but sight and all other senses as well.  You cannot do that with a camera in your hand no matter how small or easy it is to grab it.  You do an insane amount of damage to experiencing life around you when you start snapping and posting to social media.  I noticed a couple of people other than myself in that theater who just went into the zone and did the frisson thing -- but most had their phones out snapping away which is an utterly-certain way to immediately lose that state.  If you don't let yourself get there you have no idea what you're missing, by the way: It's an experience that's nearly as good as sex.

Now let's take analysis of this "paradigm shift" a step further: This behavior is insanely destructive to your real-world interpersonal relationships.  You see, there is always someone with more "-er" no matter who you are.  Pick an attribute -- skinnier, prettier, faster, richer, etc.  Social media is all about trying to show off your -er -- which means you and your partner both see all the other -ers.  Guess what: As soon as a relationship becomes competitive in that fashion whatever you had built up until that point is destroyed and can never be recovered as it was.  It only takes one of you to fall into that trap just once and the damage done to your relationship is mortal. If you want to know why all the "good ones" appear to be gone that's the reason and you're a willing and voluntary part of it.  Your friends don't have to call you and actually spend time talking with you on a regular basis to keep contact any more; they simply post on some social media site instead. By being a part of this you personally lose twice in a fashion far beyond and worse than the data mining and exploitation that organizations and people serve upon you: First by deleting from your life the more-intimate and close personal interactions you used to have but no longer do the depth of your associations is essentially destroyed and then you compound the damage when you destroy the fundamental character of your closest interpersonal relationship by allowing a competitive angle to enter into it.  You'll find out real fast if you delete (not just "walk off", but actually delete) those social profiles exactly who gives enough of a damn about you to call and arrange to spend some time face-to-face.  Hint: There's nowhere near as many people who give a **** about you as you think there are; your "friends" social media postings are really all about them, not you.

Do you drive an SUV or big pickup?  Why?  Those are the vehicles with both the worst fuel economy and the highest profit margin for the car companies!   You're insane to own one unless you have a solid need.  If you regularly haul plywood sheets or similar for work then a pickup makes sense -- of course.  If you have more than two kids then you can probably justify an SUV.  If you own a boat on a trailer or a travel camper you need a vehicle that can pull it.  But these are 10% situations -- most people drive these things and pay in excess of $40,000 for one yet they have none of these actual needs.  I bought my Mazda 6 for just over half that much, it returns nearly 38mpg on the highway, and in the low to mid 30s around town.  Oh, and it runs on regular gas -- no premium or mid-grade required.  I've now got almost 100,000 miles on it with nothing more than oil and filter changes, couple of sets of spark plugs plus a set of tires and brakes -- and everything in it works perfectly.  My cost per mile is less than half that of the nice lady next to me in her "midsized" SUV, and probably a quarter of that of the dude in the lifted pickup on the other side!  Oh, and it's cheaper to insure too since it's less car to replace if I get in a wreck.

Have, or can find, an older car in decent shape?  Keep it running with good maintenance. My '03 Jetta TDI is still on the road, the kid has it (she got the title on her 18th birthday), it's got over 200,000 miles on it and I just put a set of back brakes in it for $80 and an hour and a half of my time (which, incidentally, she got to help with and now she knows how to do it.)  It drives better now with that 200k on the clock than a lot of new cars.  It needs a temperature sender (the current one is leaking a bit of coolant) which is $35 and sitting on my counter to be put in as soon as the kid has a day off where the car will be completely cold so I can drain the coolant before I pull it.  It burns nearly zero oil between 10,000 mile changes and long ago I put a CAT fuel filter head in it so a $20 CAT common-rail rated fuel filter, running at something like a sixth of its design flow rate, lasts for close to 100,000 miles -- basically, it's a "change it once every few years" thing now with vastly superior protection for the pump and injectors than the car came with originally.  Sure, it's a bit less-refined, a bit louder, the interior is somewhat worn and such compared against a new car but it gets damn near 50mpg all day long, everything works in it and it has a good shot at making it to the point that's legal to order a drink!  Cheap to insure? You bet. Collision? Why? Wreck it, it's gone; it's way off the end of the depreciation curve. Cheap to operate?  Oh hell yeah.  800 miles between fills on the highway, if you can keep your foot off the loud pedal.  I might have done something right raising her because she loves the car; in fact, she's said she prefers it to mine!

Got a kid or two?

Did you or will you sign papers so they can get "student loans"?  Did you "support" them in taking said loans in any way, shape or form?

You're either insane, abusive or both.

Do you think such a decision is "good" or "helps" them?  Do you realize that nine out of ten jobs created since the bank blowup in 2008 do not require a college degree?  That's not a stat I had to dig for, it's right there if you bother to look -- but nobody does, or talks about it.

Is college a good investment if you have to finance it?  Almost never!  Why?  Because you cannot control for risk (you get sick before you graduate, you graduate but there are no jobs in-field that pay enough to cover the payments comfortably, you flunk out outright, you get a job when you graduate but then lose it and cannot find another that pays enough, H1b visa holders decimate the salaries in your field, etc) and yet if any of those bad things happen you are ruined.  If you spend already-acquired capital (savings) then the worst thing that can happen is that the effort you put in previously is dissipated.  If you take a loan since it cannot be discharged they will chase you relentlessly, even to the point of garnishing your Social Security payments if it takes that long, penalties will be immediately added if you default which cannot be removed (by law) and interest will continue to accumulate until you pay it off.  What's even worse is that half the snowflakes in college think the government will let them off the hook -- which means what they really believe is they can steal their education from everyone else in America!  Is it ever sane -- or adult -- to put yourself in a position where just one piece of bad luck leaves you with your "best option" being stuffing a gun in your mouth?  NO!  Never mind that if you do manage to steal those funds someone might take sufficient umbrage at your thieving ways to kill you outright and perhaps even eat you.

While we're on your kids and school let's talk for a moment about your silence while the local High Schools and Junior Highs all got rid of shop class.  You know, where you learn the basics of how to run a lathe, use a drill press, wire something, maybe do a bit of work on a car?  The so-called "modern" 18 year old doesn't know how to change the oil on his or her car or put the spare tire on if they get a flat!

Look folks, rough stuff -- maybe very rough -- is coming.  I don't know if it's going to happen right now or a few years from now but it is coming.  It always does.  Always.  We've had an extraordinary period over the last 30 or so years where the "pain points" have been relatively benign.  We've not had really any ugly wars involving the United States, we've not had really ugly economic dislocations and generally-speaking the US has been pretty calm.  The odds of that holding up given the internals of federal spending which are easily visible to anyone who cares to look are slim and none -- and Slim just left with your sister and a bottle of Jack Daniels.  It's a fair bet he's gonna get some and you're gotta get it up the back door.

Wake up.  We've chosen as a nation to stick our collective heads in the sand and pay attention to the dog whistles on the left and right instead of demanding a stop to the scams.  Those scams are in the process of overcoming our economic environment -- like it or not, believe it or not.

Either figure out your path to reduce your footprint and dependencies in all related respects or accept that when it comes, and it will soon enough, likely within the next couple of years, you're going to be completely screwed at best.

It's called adulting and you're running out of time to start doing it.

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